Accounting & Tax News

G.R. Reid Associates, LLP


Certified Public Accountants

631.425.1800

www.GRRCPAS.com 


Tax Consequences of Short-Selling Stock



An Individual investor who engages in the practice of short-selling stock encounters several complex reporting issues when it comes time to prepare their individual income tax return. Investors who sell short stock believe the price of the underlying security value is going to decline. Typically, a brokerage firm lends the investor the underlying stock and it is then sold and converted to cash. The investor is charged margin interest on the value of the borrowed securities. If the stocks pay a dividend, the investor is required to pay over the dividend to lender or broker.

For example, 100 shares Company XYZ, Inc. are sold short at $60 per share, the investors borrows the shares and immediately sells them for $6,000. As hoped, the shares decline to $40 per share resulting in a profit a $20 per share. The investor covers the position by buying the shares at $40 and delivering the securities back to lender for a gain to the account of $2,000. The short seller loses money when the price of the shares goes up and is open to potentially unlimited losses until the position is closed.

The holding period of the securities used to cover determines whether the gain or loss is reportable as short-term or long-term. However, special holding period rules apply to prevent taxpayers from using short sales to convert short-term gains into long-term gains and long-term losses to short-term losses. If on the date of the short sale the investor owns or acquires substantially identical property before closing the short any gain is deemed short-term regardless of how long the underlying securities used to cover the position have been held. If on the date of the short sale the underlying security used to cover was held more than one year any loss from the short sale will be deemed to be long term regardless of the holding period of the securities used to cover.

When the short-sale transaction is closed, the sale is reported on Form 8949, Sale and Other Disposition of Other Assets, If the 1099-B issued by the broker shows the short sale proceeds in a tax year other than the year gain or loss is properly recognized it is necessary to reconcile the difference between amounts reported on the Form 1099-B and the proceeds shown on Form 8949.

The margin interest paid on the loan is a deductible as an itemized deduction as investment interest expense reportable on Form 4952, Investment Interest Expense Deduction, subject to the limit of investment income.

Investors also need to be careful to avoid constructive sale rules requiring the recognition of gain at the time of the short sale and not the time of the close of transaction.

When a dividend is paid on a stock that is sold short, the short seller must make a payment in lieu of dividends to the lender. The payment is deductible investment interest expense to the extent of investment income. If the short position is closed within 45 days in lieu of dividend payment is not deductible, but is added to the basis of the stock used to close the short sale.

Wash sale rules also apply to short sale loss transactions when another short sale of the same security is entered into within 30 days after the closing of the sale given rise to a loss. The loss will be deferred and added to the basis of the second transaction. The wash sale rule is the same whether it is a short sale or long sale.

When entering into short sale transactions, Investors need to pay close attention to complex tax reporting requirements. 

Healthcare & Benefit Services

: : Julie Seiden, Managing Director,
Health Benefits Services | 

631.923.1595 ext. 310

G.R. Reid Healthcare & Benefit Services, LLC

Big dogs play nice with reform

UnitedHealthcare started it. Aetna and Humana soon followed.

Wellpoint’s waffling, holding out for the Supreme Court ruling.

What are they doing? Well, as we reported here, ("Other carriers jump on reform bandwagon") some of the largest insurers in the business have come out to say they’ll still abide by some of the aspects of PPACA regardless of what the court does.

Three of the top five insurers in the country plan to carry on with preventative care coverage – such as immunizations and screenings – without a copay. They also said they’ll keep covering those older children under their parents’ policies – until they hit 26, anyway. They’re also gonna maintain a more streamlined appeals process for denied claims.

United and Humana actually stepped out a little further, insisting they wouldn’t enforce lifetime dollar limits on claims.

All in all, it sounds like they’re playing nice even if they don’t have to. Because there’s still a real chance even these earlier regs could get tossed. We’ll find out soon enough.

But as we reported, these are the most popular provisions of the law, anyway, and the carriers have already done the math, lumping the extra costs into the last round of premium bumps. If anything, dropping these provisions might be a bigger headache at this point. So they can score a public relations win without taking a hit on their bottom line. Nothing wrong with that. Although it will be interesting to see if Wellpoint faces any backlash for dragging its feet on this while its competitors come out looking like humanitarians.

And, honestly, why wouldn’t they? Have we already forgotten how the carriers jumped on board this legislation early on – after the public option died, of course. And while I think it’s a stretch to say these carriers are “embracing” reform as a few mainstream media outlets are pointing out, it’s safe to say they’re simply accepting a new reality – something brokers need to start doing, as well.

I think this is a good move, though, and not just from a PR perspective. But what this really shows, is that, cynicism aside, while this legislation remains a convoluted mess, it does have its worthwhile provisions – even if they are buried under red tape and rampant spending. It also shows that no matter what happens to this particular law, some of the things it’s ushered in are here to stay, whether it’s as simple as coverage provision or as far-reaching as the state exchanges.

Source 

© 2012 BenefitsPro. A Summit Business Media publication. All Rights Reserved. 

Written by Denis Storey

Accounting & Tax News

Congress Passes Temporary Payroll Tax Cut Extension

G.R. Reid Associates, LLP
631.425.1800

The reduced 4.2% Social Security tax rate will remain in effect at least through February.

The Senate and the House of Representatives on Friday both agreed by unanimous consent to extend the reduced rate, and President Barack Obama signed the bill—the Temporary Payroll Tax Cut Continuation Act of 2011 (H.R. 3765)—the same day. The reduced rate had been scheduled to end after Dec. 31.

In the new year, a conference committee of representatives and senators will be appointed to discuss extending the reduced rate for the rest of 2012.

The employee portion of the Social Security tax was reduced from 6.2% of the first $106,800 of wages to  4.2% for 2011 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312. The employer portion remained at 6.2%. Under the law enacted Friday, the 4.2% rate is extended through Feb. 29, 2012.

The act provides special rules for 2012 so that taxpayers with self-employment income and income from employment in excess of $18,350 (one-sixth of the 2012 Social Security wage base of $110,100) do not receive an extra benefit. If a full-year extension of the payroll tax cut is not enacted, taxpayers with income from employment for January and February that exceeds $18,350 will be required to recapture the excess benefit they receive. The recapture provision was included instead of a cap on the amount of employment income because of the compliance difficulties that would cause employers.

Because the extension affects withholding and was enacted only a little over a week before the higher payroll tax was scheduled to go into effect, it is not clear how well employers and payroll companies will be able to handle that change. The IRS on Friday notified employers that they should implement the lower payroll tax rate as soon as possible in 2012, but not later than Jan. 31 (IR-2011-124). The IRS also said that if an employer overwithholds during January, it should make an offsetting adjustment in workers’ pay as soon as possible, but not later than March 31, 2012. The IRS also said that it will issue more guidance on implementing the provisions of the two-month extension, including revised employment tax forms and information for employees who may be subject to the recapture provision.

The act also extends certain unemployment benefits and blocks a cut in Medicare payments to doctors.

Congress’ use of unanimous consent to approve the extension allowed it to send the bill to the president without requiring lawmakers who had left the capital to return to Washington.

Published in the Journal of Accountancy on December 23, 2011.

Financial & Wealth Services News

:: George G. Elkin, Managing Director, Financial & Wealth Services
631.923-1595 ext. 336
G. R. Reid Wealth Management Services, LLC 

How Should I Manage My Retirement Plan?

Employer-sponsored retirement plans are more valuable than ever. The money in them grows tax-deferred until it is withdrawn at retirement. Distributions from a tax-deferred retirement plan, such as a 401(k) plan, are taxed as ordinary income and may be subject to an additional 10-percent federal tax penalty if withdrawn prior to age 59 ½. And contributions to a 401(k) plan actually reduce your taxable income. But figuring out how to manage the assets in your retirement plan can be confusing, particularly in times of financial uncertainty.

Conventional wisdom says if you have several years until retirement, you should put the majority of your holdings in stocks. Stocks have historically outperformed other investments over the long term. That has made stocks attractive for staying ahead of inflation. Of course, past performance does not guarantee future results. The stock market has the potential to be extremely volatile. The return and principal value of stocks fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost. Is it a safe place for your retirement money? Or should you shift more into a money market fund offering a stable but lower return? And will the instability in the markets affect the investments that the sponsoring insurance company uses to fund its guaranteed interest contract?
If you’re participating in an employer-sponsored retirement plan, you probably have the option of shifting the money in your plan from one fund to another. You can reallocate your retirement savings to reflect the changes you see in the marketplace. 

Here are a few guidelines to help you make this important decision.

Consider Keeping a Portion in Stocks

• In spite of its volatility, the stock market may still be an appropriate place for your investment dollars — particularly over the long term. And retirement planning is a long-term proposition.
• Since most retirement plans are funded by automatic payroll deductions, they achieve a concept known as dollar cost averaging. Dollar cost averaging can take some of the sting out of a descending market.
• Dollar cost averaging does not ensure a profit or prevent a loss. Such plans involve continuous investments in securities regardless of the fluctuating prices of such securities. You should consider your financial ability to continue making purchases through periods of low price levels. Dollar cost averaging can be an effective way for investors to accumulate shares to help meet long-term goals.

Diversify

• Diversification is a basic principle of investing. Spreading your holdings among several different investments (stocks, bonds, etc.) may lessen your potential loss in any one investment.
• Do the same for the assets in your retirement plan.
• Keep in mind, however, that diversification does not guarantee against investment loss; it is a method used to manage investment risk.

Find Out About the Guaranteed Interest Contract

• A guaranteed interest contract offers a set rate of return for a specific period of time, and it is typically backed by an insurance company. Generally, these contracts are very safe, but they still depend on the security of the company that issues them.
• If you’re worried, take a look at that company’s rating. The four main insurance company rating agencies are A.M. Best, Moody’s, Standard & Poor’s, and Fitch Ratings. A.M. Best ratings are based on financial conditions and operating performance; Fitch Ratings, Moody’s, and Standard & Poor’s ratings are based on claims-paying ability. You should be able to find copies of these guides at your local library.

Periodically Review Your Plan’s Performance

• You are likely to have the chance to shift assets from one fund to another. Use these opportunities to review your plan’s performance. The markets change. You may want to adjust your investments based on your particular situation.
• The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.

 

George Elkin is a Registered Representative offering Securities through American Portfolios Financial Services, Inc. Member: FINRA, SIPC. Investment Advisory products/services are offered through American Portfolios Advisors Inc., an SEC Registered Investment Advisor. G.R. Reid Consulting Services, LLC  is not a registered investment advisor and is independent of American Portfolios Financial Services Inc. and American Portfolios Advisors Inc. Unless specifically stated otherwise, the written advice in this memorandum or its attachments is not intended or written to be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Information is time sensitive, educational in nature, and not intended as investment advice or solicitation of any security.
This material was written and prepared by Emerald.

Commercial Insurance News

: : Louis Santelli, CPCU, CIC, Managing Director, Commercial Insurance Services
631.923.1595 ext. 330
G.R. Reid Insurance Services, LLC
 
Five Ways to Avoid OSHA Penalties

In a one-week period in September 2010, the U.S. Occupational Safety and Health Administration announced eight citations against employers; penalties totaled close to one million dollars. The agency fined a picture frame manufacturer for not protecting workers' hearing, allowing combustible dust to accumulate, and blocking exit routes. An excavating contractor is paying a six-figure fine for failing to protect workers against cave-ins. A painting contractor's scaffolding was missing railings, bracing and access ladders. Because OSHA had cited the company for these violations before, it levied a fine exceeding $200,000.
Clearly, failing to comply with OSHA regulations can be costly for employers. However, by implementing a few new procedures and attitudes, a company can reduce the chances that its name will end up in an OSHA news release.

Keep in mind that insurance does not cover many of the costs resulting from workplace accidents, such as time spent on investigating the incident, reduced employee morale, productivity lost because of the disruption and the absence of a worker, reporting costs, and the cost of OSHA penalties. 

Improve record keeping. 
Think of good documentation as your first defense against an OSHA inquiry. Inspectors who find information gaps in the OSHA 300 log (the record of work-related injuries and illnesses) may initiate a full-scale safety audit of the business. If your business has deficiencies in its logs for the past three to five years, devote some time to correcting them. Personnel files and workers' compensation loss records can provide much of the missing information.
Focus on ergonomics. OSHA has announced that it will pay special attention to musculoskeletal problems. Businesses that seek out ways to prevent repetitive motion disorders will avoid citations and penalties. They will also pay lower workers' compensation insurance premiums in the long run. Analyze how workers are performing their tasks and look for ways to reduce the strain on their joints, necks and backs.
 
Fix the routine violations first. 
Some safety issues are simple and cost little or nothing to correct. 
For example:

• Blocked exits
• Lack of protective equipment, such as gloves and safety goggles
• Poor housekeeping
• Improper storage of materials such as flammable liquids

These problems can accumulate over time if management is not paying attention. Operations with large numbers of these violations have paid substantial penalties to OSHA, so monitoring and correcting them is essential.

Have a plan for disasters. 
Hurricanes in recent years and 9/11 have taught us that all organizations need to have emergency procedures in place for sudden events like storms and terrorist attacks and gradual events like flu pandemics. 

Disaster plans should include:

• Training for employees on what to do in the event of an emergency
• Procedures for safe evacuation from the building
• Workplace hygiene
• Stockpiling of emergency supplies such as first-aid kits
• Arrangements for operating from remote locations
• Communications with employees, their families, customers and vendors

Although OSHA will not be concerned with some of these aspects of the plan, having them in place will help the business survive the event.

Look at safety as a profit driver, not a cost center. 
Preventing workplace injuries costs money, but it also saves money and can improve a business's profitability. Some project owners and general contractors will consider bids only from contractors with workers' compensation experience modifications lower than 1.0. Firms with a reputation for safe operations will attract better workers. 

Money saved on accidents that never occur goes straight to the bottom line.
Some workplace injuries may occur despite an employer's best efforts to prevent them. However, taking reasonable steps to improve safety in the workplace will reduce the frequency and severity of those injuries, make the business more competitive, and avoid problems when an OSHA inspector visits.

Health Benefit Services News

: : Julie Seiden, Managing Director,
Health Benefits Services | 

631.923.1595 ext. 310

G.R. Reid Healthcare & Benefit Services, LLC




2012 HSA & FSA Changes to Know About

Health savings accounts and flexible spending accounts are growing in popularity. Many people aren't aware of the changes that take place in these plans from year to year. It's important to discuss account details with an agent each year to be fully aware of the current rules or upcoming changes.

Flexible Spending Accounts

These accounts are sometimes called flexible spending arrangements. They are tax-advantaged accounts that let employees automatically deposit a specific amount of each paycheck into them. After funds accumulate, they can be used to pay for qualified medical expenses. These accounts are different from HSAs and HRAs in the respect that they are usually offered with traditional medical plans. They also differ from HSAs in the respect that the unused funds in the account may not be carried over to the next year. Debit cards or forms are used to access funds from the account if money is needed. Flexible spending accounts allow account holders to contribute to the FSA for any costs that aren't covered by insurance. Some examples of such expenses include coinsurance, copay amounts and deductibles. If a health insurance won't cover a treatment or related health expense, FSA funds can be used to pay for it. The specified limits saw some changes from 2011 to 2012.

Contribution Limits

It was decided that 2012 would be the last year for no limits on FSA contributions. While there may not be limits in place, plans must specify a maximum percentage of compensation to be contributed to the FSA or a maximum dollar amount. The changes from 2010 to 2011 included over-the-counter medicines being eliminated from coverage if they weren't prescribed by a doctor. The year 2013 will likely see one of the biggest changes: FSA contribution limits of $2,500 annually with yearly inflation increases.

Health Savings Accounts

HSAs are medical savings accounts that also have tax advantages. Taxpayers who are enrolled in HSA-qualified health plans with high deductibles are able to obtain them. At the time of deposit, the funds contributed to these accounts are not subject to federal income tax. Any unused funds that remain in the account at the end of the year are carried over to the next year and added to further contribution amounts. Since contribution also change with these plans each year, it's important to be aware of the changes. The changes from 2011 to 2012 include an increase in out-of-pocket HDHP maximums and HSA contribution limits. However, there are no changes with the HDHP required minimum deductibles.

HSA Contribution Limits

Family: $6,250

Individual: $3,100

Catch-Up Contributions: $1,000
The individual amount of $3,100 reflects an increase of $50 from 2011s limit. 
The $6,250 limit for families is an increase of $100 from 2011. 
Catch-up contribution limits, which are for people over the age of 55, remain the same between 2011 and 2012.

HDHP Minimum Required Deductibles

Self: $1,200

Family: $2,400

HDHP Out-Of-Pocket Maximum - Family: $12,100

HDHP Out-Of-Pocket Maximum - Self: $6,050
The HDHP limit increased by $100 between 2011 and 2012 for singles and by $200 for families. 

Another change between 2011 and 2012 is eligibility of over-the-counter medicines. Insulin is the only OTC medicine approved for reimbursement in 2012 under a health FSA, HSA or HRA without a prescription. In addition to this, it was decided that the penalty of 10 percent for ineligible expenses paid for using HSA funds would increase to 20 percent in 2012.

Health Benefit Services

: : Julie Seiden, Managing Director,
Health Benefits Services | 

631.923.1595 ext. 310

G.R. Reid Consulting Services, LLC




Have You Considered Full-Replacement CDHP?


The Corporate Executive Board, an advisory and research company, and HighRoads, a compliance and health care costs services provider, assembled 2011 data from almost 11,000 medical plan design and the medical plan rates of over 30 million Americans. The data showed that an average of $187 dollars per year in out-of-pocket expenses was saved when an employee used a high-deductible consumer-driven health plan, or CDHP. The savings for families averaged $204. However, when compared to health maintenance organization (HMO) plans and traditional preferred provider organization (PPO) plans, CDHP premium and out-of-pocket savings might be too little, as well as the deductible being too high, to spur employees to make the change. Even with substantial communications related to high-deductible CDHPs, PPOs are still the most widely offered and popular plans, representing 39% of employer plans. HMOs represented 27% of U.S. employer plans and CDHPs linked to health savings accounts (HSAs) represented 17%. Other data included:
• Traditional, non-high-deductible plan premiums averaged $132.11, exclusive provider organization (EPO) plans averaged almost $112, HMO premiums averaged almost $133, and PPO premiums averaged almost $150 (employee-only/per month).
• At an average premium of almost $63 (employee-only/per month,) CDHPs were significantly lower than other plans.
• When compared to PPOs, CDHP plans were accompanied by lower yearly out-of-pocket costs.
• For CDHPs, the average yearly out-of-pocket cost was $2,128 for individuals and $5,656 for families. For PPOs, the average yearly out-of-pocket cost was $2,315 for individuals and $5,860 for families.
• The average in-network co-pays with non-CDHP plans were $103 per emergency room visit, $31 per specialist visit, and $19 per primary care provider visit.
By effectively educating employees about potential cost savings from CDHPs, employers can offer employees more control and flexibility related to health care decisions and help them decrease their out-of-pocket yearly expenses.

Implementation Tips For Shifting to Full-Replacement CDHP
Some businesses are offering one or more CDHPs since just encouraging employee enrollment might not be sufficient to create the enrollment numbers necessary for significant cost reduction. Towers Watson/National Business Group on Health found that eight percent of employers are currently offering full-replacement CDHPs to some portion of their workforce. Most experts recommend employers consider several factors before making such a commitment. For example, employers should consider their low-income workers - do they have families and will they need an employer contribution to a HRA or HSA to ensure they're protected from exorbitant out-of-pocket costs? Employers should also assess and weigh the challenges that will come from full-replacement CDHP against the costs of crafting a plan to drive voluntary participation rates.

Should a full-replacement CDHP be the best option, here are a few suggestions:
• Use focus groups to test full-replacement CDHP. Listen to the employees. Find out what they might need to utilize the plan. Such feedback can be helpful as communications are drafted.
• Don't forget the big picture. Employers need to clearly and effectively explain how the change is connected to the business's overall benefits strategy. For example, is there a wellness factor that could be interlinked to the full-replacement CDHP? Employees also need to see how the change plays into their personal big picture, such as from being shown the strong connection between health care decisions and retirement decisions and the benefit of health care expense saving with a tax-advantaged HSA.
• Address the change head-on and keep stakeholders involved in the process. If rumors get started before an announcement is made to employees, it can create confusion and be detrimental to employee support. A news release, whether it be from a media relations firm or internally through HR, should be sent to explain the what and why of the change. Be sure to keep managers; supervisors; and, if applicable, union officials in the loop.
• Make any choice among CDHPs meaningful. Also, be sure that the options are differentiated thoroughly so that employees can clearly determine which option is best for their needs and be confident in the their final decision.
• Use a combination of print and news media to reach all the workforce generations. Keep in mind that Twitter, Facebook, blogs, and other online portals are freshly-streamed, inexpensive media portals to engage employees.
• Communicate early and frequently, and don't forget to actually listen and respond. Don't be surprised by an array of employee reactions. Some employees might be open to CDHP, while others might be fearful or angry. Anticipate all the reactions. Give employees a portal, such a call center line, to vent, but also give them sufficient information and time to eventually embrace the change. Communication should begin at least three months before annual enrollment and include CDHP tip sheets and user guides.
• Relating is key. Young, single workers aren't going to plan the same way a middle-age parent or older individual plans. Testimonials within communications can help employers reach their multi-demographic workforce.
• Whether using print or other media to communicate employee benefits, ensure it's done year-round to keep the stream of information fresh and up-to-date.

Financial Services News

G.R. Reid Consulting Services, LLC
 

 

What Is the Difference Between a Fixed Annuity and a Variable Annuity?

An annuity is a contract with an insurance company in which you make one or more payments in exchange for a future income stream in retirement. The funds in an annuity accumulate tax deferred, regardless of which type you select. Because you do not have to pay taxes on any growth in your annuity until it is withdrawn, this financial vehicle has become an attractive way to accumulate funds for retirement.
 
Annuities can be immediate or deferred, and they can provide fixed returns or variable returns.



Fixed Annuity
A fixed annuity is an insurance-based contract that can be funded either with a lump sum or through regular payments over time. In exchange, the insurance company will pay an income that can last for a specific period of time or for life.
 
Fixed annuity contracts are issued with guaranteed minimum interest rates. Although the rate may be adjusted, it should never fall below a guaranteed minimum rate specified in the contract. This guaranteed rate acts as a “floor” to potentially protect a contract owner from periods of low interest rates. Fixed annuities provide an option for an income stream that could last a lifetime. The guarantees of fixed annuity contracts are contingent on the claims-paying ability of the issuing insurance company.
 
Immediate Fixed Annuity
Typically, an immediate annuity is funded with a lump-sum premium to the insurance company, and payments begin within 30 days or can be deferred up to 12 months. Payments can be paid monthly, quarterly, annually, or semi-annually for a guaranteed period of time or for life, whichever is specified in the contract. Only the interest portion of each payment is considered taxable income. The rest is considered a return of principal and is free of income taxes.
 
Deferred Fixed Annuity
 With a deferred annuity, you make regular premium payments to an insurance company over a period of time and allow the funds to build and earn interest during the accumulation phase. By postponing taxes while your funds accumulate, you keep more of your money working and growing for you instead of paying current taxes. This means an annuity may help you accumulate more over the long term than a taxable investment. Any earnings are not taxed until they are withdrawn, at which time they are considered ordinary income.
 
Variable Annuity
A variable annuity is a contract that provides fluctuating (variable) rather than fixed returns. The key feature of a variable annuity is that you can control how your premiums are invested by the insurance company. Thus, you decide how much risk you want to take and you also bear the investment risk.
 
Most variable annuity contracts offer a variety of professionally managed portfolios called “subaccounts” (or investment options) that invest in stocks, bonds, and money market instruments, as well as balanced investments. Some of your contributions can be placed in an account that offers a fixed rate of return. Your premiums will be allocated among the subaccounts that you select.
 
Unlike a fixed annuity, which pays a fixed rate of return, the value of a variable annuity contract is based on the performance of the investment subaccounts that you select. These subaccounts fluctuate in value with market conditions and the principal may be worth more or less than the original cost when surrendered. Variable annuities provide the dual advantages of investment flexibility and the potential for tax deferral. The taxes on all interest, dividends, and capital gains are deferred until withdrawals are made.
 
When you decide to receive income from your annuity, you can choose a lump sum, a fixed payout, or a variable payout. The earnings portion of the annuity will be subject to ordinary income taxes when you begin receiving income. Annuity withdrawals are taxed as ordinary income and may be subject to surrender charges plus a 10% federal income tax penalty if made prior to age 59½. Surrender charges may also apply during the contract’s early years.
 
Annuities have contract limitations, fees, and charges, which can include mortality and expense risk charges, sales and surrender charges, investment management fees, administrative fees, and charges for optional benefits. Annuities are not guaranteed by the FDIC or any other government agency; they are not deposits of, nor are they guaranteed or endorsed by, any bank or savings association. Any guarantees are contingent on the claims-paying ability of the issuing insurance company. 
 
Variable annuities are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the variable annuity contract and the underlying investment options, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal income tax penalty. You are encouraged to seek tax or legal advice from an independent professional advisor.

The above information was supplied by Emerald Connect, Inc. All rights reserved © 2011.  This material may not be reproduced without permission.